Several leaders of the cryptocurrency space and scope of traditional Finance sent to the Commission on securities and exchange Commission (SEC) with the objective to encourage the regulator to approach more closely to the regulation of certain companies that work with cryptocurrency.
In a letter to the Bitcoin Core developer Brian Bishop (Bryan Bishop), former managing Director of Morgan Stanley’s Caitlin long (Caitlin Long), a developer of solutions in the field of e-Commerce Chris Allen (Christopher Allen), head of the blockchain-division of Ernst&Young Angus champion de Gresini (Angus Champion de Crespigny) and Phiri’s lawyer Gavin (Gavin Fearey) warned the SEC about the activities of some companies that their actions could destroy bitcoin’s inherent advantages, if the process is not controlled.
We are talking about the principle of operation of the operator of the new York stock exchange company Intercontinental Exchange (ICE), which recently announced its decision to launch its own cryptocurrency platform called Bakkt supported by Microsoft.
Among a number of recommendations voiced in the letter, noted Brian Bishop, have made significant contributions to Bitcoin code in 2014. He argues that the SEC should work with cryptocurrency developers to create new regulations.
“Bitcoin is a technological system with many nuances. Its main idea is realized thanks to the software, mathematics and cryptography, not politics,” said Brian in a conversation with Forbes.
The authors of the letter argue that the regulator needs to impose certain restrictions on the ability Bakkt on interaction with cryptocurrencies.
“Regulating this industry, we cannot follow rules that do not take into account the strengths of cryptocurrencies. Storage of all client assets in one account, which is used in the traditional Finance sector, undermined the main advantages of crypto-currencies,” they write.
The document also notes that digital assets are by nature divided. This separation is necessary to protect investors.
Storing all assets on a single account with the subsequent lending and investing will ultimately lead to devalue bitcoin. This is due to the creation of additional liquidity which is not backed by existing assets. This process is similar to the situation on the financial markets in 2007-2008, after which there was a financial collapse.
In addition, there is additional interest to cyber criminals as bitcoin exists only in a virtual form, in contrast to securities that are in tangible form lying in the Depository trust and clearing Corporation (DTCC).
Among other concerns, the authors also argue the possibility of “remortgage” of cryptocurrency through derivatives. Remortgage is a situation where the company claims on existing assets in their accounts and then lends them to another organization, which also takes them into account when calculating the balance. It turns out the situation when the same amount of virtual assets is accounted for several times.
“We believe that existing SEC rules for storing assets do not reflect the risks inherent in digital currencies, and do not take into account the advantages of the technology. For a more detailed understanding of the possibilities offered by blockchain, we recommend the regulator to communicate with those who work in the industry and is well versed in technology. This can be a cryptocurrency developers, stock exchanges, the developers of smart contracts, operating managers scriptactive. This step ensures the application of best practices” — such words has finished the message the authors of the letter.